Cathay shrugs off competition with near-record $4.4b profit
Cathay Pacific Airways bucked sky-high fuel prices and new competition from regional low-cost carriers to record a near-record profit for 2004, confirming its status as one of the world's most profitable airlines.
Rebounding strongly from a Sars-struck 2003, Cathay reported a 239 per cent jump in net profit to $4.41 billion. The result is the second best in Cathay's history. It posted net profit of $5 billion in 2000, and would have exceeded that last year if not for persistently high fuel costs.
'Fuel accounted for almost 24 per cent of our total operating costs, up from 19.8 per cent a year earlier,' said new Cathay chief executive Philip Chen Nan-lok. '[This year] remains very challenging given the burden of rising fuel costs.'
The price of jet fuel on the Singapore commodities market - the region's largest trading centre for oil products - neared US$65 a barrel last week, compared with a recent low of US$46 in early January.
Last year, Cathay carried a record number of passengers and has not been shy in passing on its higher fuel costs to them. The Civil Aviation Department said yesterday that Cathay had applied to extend its temporary fuel surcharge.
Since May, the airline has been allowed to charge passengers an additional US$19 for each leg on a long-haul journey and US$7 on regional flights.
'It's not exactly compensation [for Cathay], but it helps to take away some of the pain,' JP Morgan aviation analyst Peter Negline said.
Sales to North America represented the biggest gain last year, increasing 53 per cent to $5 billion.
Mr Chen said that was largely a result of the airline moving quickly to expand its presence in the transpacific market, while competitors who cut back flights to Hong Kong and Asia during Sars failed to reinstate them. 'We were the first airline to bring everything back to normal after Sars and, at one point, we operated the only direct air links between Hong Kong and the US.'
Mr Chen said Cathay would continue to expand its North America business by increasing frequencies to Los Angeles and other cities.
The mainland is also expected to be a major focus of Cathay's expansion as it aligns itself more closely with Air China. Late last year, Cathay bought a 10 per cent stake in China's flag carrier and inaugurated daily flights to Beijing.
